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5. October 2015 16:23
by Irene

September Market Commentary

5. October 2015 16:23 by Irene | 0 Comments

September has been another volatile month for equities and bonds. Just as everybody thought that the Fed was upbeat on the economy, it decided to leave US interest rates unchanged. A hold on rates was more or less priced into the markets, but what spooked investors was Fed Chair Yellen’s speech afterwards, highlighting uncertainty in the markets with particular concern about the growth in China and Emerging Markets. As all the financial press reported, Q3 2015 was the worst for global equities since 2011.

United Kingdom

The FTSE 100 index fell 2.9% for the month of September, and is down 6% for Q3 2015. Funding issues at Glencore did not help, with the stock down nearly 30% in September alone and about two-thirds wiped off its value in Q3, but there were somewhat weaker numbers coming from the UK with the Markit Services and Manufacturing PMI numbers and the ZEW Economic Sentiment Index all declining over the last three months. Both PMI numbers are still above 50, signalling growth, but the trend is slowly reversing.


Macro-economic indicators for Europe have generally been positive, with business and consumer surveys providing reassurance about the euro area’s growth momentum in the face of the slowdown in China. It is notable that European growth is now being driven by an increase in domestic demand and less by net trade. With nine months of consecutive quarters of growth, the relative immunity of the European economy to the Greek crisis and the Chinese slowdown is encouraging. That is, if one does not look at the actual equity markets, with the Euro Stoxx 50 down 5.1% in September, the DAX down 5.8% and the CAC down 4.1%. Indicators for Germany still signal a healthy economy, but may not have priced in the woes of Volkswagen yet. One of the countries that is showing signs of growth again is France, with economic reforms slowly filtering through. The ECB is most likely to continue its QE programme with at least the same speed and most likely also buying asset-backed securities.

United States

September started with good news for the US economy as figures for July confirmed that the trade deficit was the lowest for five months. As the month progressed and volatility increased in the markets, the likelihood of a rate increase seemed to diminish once and for all. News on the jobs front was somewhat muted with the US economy adding less jobs in August than expected. With the end of month data showing that more than half of all asset classes ended September in the red, Yellen’s dovish comments on the US economy and its dependency on Chinese volatility and falling commodity prices seemed to have influenced the serious wobble seen in the markets.

Emerging Markets

Over in Emerging Markets, equity markets in Brazil and Russia were down 5% and 3% respectively in local currency terms. The flight away from EM currencies meant that weaknesses for EM were compounded in Dollar and Sterling terms. Inevitably, the slowdown in China, coupled with still-high supply, did not help falling commodity prices, which in turn continued to hurt commodity-exporting emerging markets. Commodities remain the worst performing asset class for Q3, with emerging markets not far behind.

Fixed Income

The only positive news came from Fixed Income with UK gilts up 1.2% in September. With the US keeping rates on hold in September, US Treasuries were also a winner, gaining 2.9% in GBP, which was also helped by a devaluation of Sterling. Corporate bonds were flat or slightly negative with US high yield the most negative, losing around 3%.

Market Returns Overview

Source: Markit, Twenty20 Investments, as of 30 Sep 2015, all returns in GBP.

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